Marking the bill as H.R. 4 indicates the significance placed on repeal by the majority; typically, high priority legislation is assigned a low H.R. number. For example, the Recovery Act, introduced just after the President took office in 2009, was labeled H.R. 1. Consistent with this scheme, the current majority’s legislation to repeal the health care act has been labeled H. R. 2.
As written, H.R. 4 is a straight-up repeal, without revenue offsets. That is, the repeal, which was scored to cost $19 billion in lost tax revenues, is not funded by an increase in other taxes or revenues.
When this legislation comes to vote, we certainly expect it will pass the House easily. However, the more interesting maneuvering will come when the bill goes to the Senate, which might struggle over ways to pay for the repeal. Already, Sen. Michael Johanns (NE) has announced that he will introduce 1099 repeal legislation in the Senate on January 25; his repeal would be paid for by using unspent, unobligated funds from federal accounts (e.g., Recovery Act dollars).
As you all know, the tax bill sailed through both the Senate and House during the lame duck session and was signed into law on December 17. The “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” is a $859 billion bill that extends the Bush tax cuts for two years and sets the estate tax at 35 percent for estates exceeding $5 million through 2012.
For many businesses, a big disappointment was Congress’ failure to use this bill to repeal the onerous Form 1099 reporting requirement, which Republicans, Democrats and the President have said they support. But even with this shortcoming, there is a definite upside in this legislation for businesses with the inclusion of two important provisions for businesses:
- R&D Credit Extension. A two-year retroactive extension of the R&D tax credit from January 1, 2010, through December 31, 2011; the legislation also extends the Alternative Simplified Credit rate at 14 percent for 2010 and 2011. This R&D tax credit benefits companies that incur expenses in the development or improvement of products and technologies.
- 100-Percent Expensing. For the 2011 tax year, businesses will be allowed to expense 100% of their investments in qualified depreciable property and equipment purchased and put into service during 2011. So, instead of depreciating the cost of an asset over a period of years, the entire expenditure can be expensed on the 2011 tax return. Small businesses can already expense up to $500,000 for tax years 2010 and 2011, so this provision extends this stimulating provision to all businesses.
While not benefitting businesses directly, another provision that will increase net income for employees is a 2-percent decrease in payroll tax for social security (i.e., a reduction from 6.2 percent to 4.2 percent).
Clearly, the lame duck session brought signs of Congressional bipartisanship that have not been seen over the last year, and we hope this working relationship will extend into the next Congress. We certainly anticipate bipartisan support for repealing the 1099 reporting requirement will extend to the next Congress, and CompTIA will continue to push for repeal of this burdensome reporting requirement. Small businesses need certainty to adequately plan their budgets and business operations, and repeal of this provision will be at the top of CompTIA’s small business agenda for 2011.
